F ig E h g M g t A t Foreign Exchange Management Act

(FEMA)
Dr Kavita Srivastava
(FEMA)
Dr. Kavita Srivastava
Department of Management
ITS Gh b d ITS, Ghaziabad
Introduction
Foreign exchange transactions were regulated in India by the Foreign exchange transactions were regulated in India by the
foreign Exchange Regulation Act, 1973
This act sought to regulate certain aspects of the conduct of the
business outside the country by Indian companies and in India
by foreign companies
Following the libralisation policy 1991 some amendments to Following the libralisation policy 1991, some amendments to
FERA were effected in 1993
The main aim of FERA was conservation and proper utilisation p p
of the foreign exchange resources of the country
Since FERA needed lot many modifications after 1991
d l h h accordingly a new act the Foreign Exchange Management Act
1999, replaced the FERA
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FEMA
FEMA which came into effect from January 1 2000 FEMA , which came into effect from January 1, 2000,
extends to the whole of India and also applies to all branches,
offices and agencies outside India, owned or controlled by a o ces a age c es outs e a, ow e o co t o e y a
person resident in India
Objectives: Objectives:
To facilitate External Trade
To promote the orderly development and maintenance of To promote the orderly development and maintenance of
foreign exchange market
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Dealing in Foreign Exchange etc.
Section 3 of FEMA imposes restrictions on dealings in foreign exchange and p g g g
foreign securities and payments to and receipts from any person outside
India . Accordingly, except as provided in terms of the Act, or with general
or special permission of the Reserve Bank, no person shall-
l f h f h h h Deal in any foreign exchange or foreign security with any person other than
an authorized person
Make any payment to or for the credit of any person resident outside India in
M any Manner
Receive otherwise through an authorised person, any payment by order or
on behalf of any person resident outside India in any Manner
E i fi i l i i I di id i f i Enter into any financial transaction in India as a consideration for or in
association with acquisition or creation or transfer of a right to acquire, any
asset outside India by any person
Further no person resident in India shall acquire hold own posses or Further, no person resident in India shall acquire , hold , own, posses or
transfer any foreign exchange, foreign security or any immovable property
situated outside India
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Holding of Foreign Exchange , etc.
S th i id d i thi t id t i Save or otherwise provided in this act, no person resident in
India shall acquire, hold, own, posses or transfer any foreign
exchange foreign security or any immovable property exchange, foreign security or any immovable property
situated outside India.
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Current Account Transactions
FEMA it d li i f i h th h FEMA permits dealings in foreign exchange through
authorised person for current account transactions. However,
the central government can impose reasonable restrictions in the central government can impose reasonable restrictions in
public interest
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Capital Account Transactions
Any person may sell or draw foreign exchange to or from an Any person may sell or draw foreign exchange to or from an
authorised person for capital account transactions permitted by
the Reserve Bank in consultation with the central government. g
The Reserve Bank may , however, without prejudice to the
generally of this, prohibit, restrict or regulate the following:
Transfer or issue of any foreign security by a person resident in
India
Transfer or issue any security by a person resident outside India.
Transfer or issue of any security or foreign security by any
branch, office or agency in India of a person resident outside
India
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Any borrowing or lending in foreign exchange in whatever form or y g g g g
by whatever name called
Any borrowing or lending in rupees in whatever form or by
h ll d b id i I di d whatever name called between a person resident in India and a
person resident outside India.
Deposits between persons resident in India and person resident Deposits between persons resident in India and person resident
outside India
Export import or holding of currency or currency notes p p g y y
Transfer of immovable property in India, other than lease not
exceeding 5 years, by a person resident outside India
Giving guarntee or survey in respect of any debt , obligation or
other liability incurred-
By a person resident in India and owned to a person resident outside By a person resident in India and owned to a person resident outside
India
By a person resident outside India y p
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Export of Goods & Services
Every exporter of goods shall : Every exporter of goods shall :
Furnish to the RBI or to such other authority as specified,
containing true and correct material particulars, including the g p , g
amount representing the full export value or , if the full export of
goods is not ascertained at the time of export, the value which the
exporter, having regard to the prevailing market conditions,
expects to receive on the sale of the goods in a market outside
India India
Furnish to RBI such other information as may be required by the
RBI for the purpose of ensuring the realisation of the export RBI for the purpose of ensuring the realisation of the export
proceeds by such exporter
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Realisation & Repatriation of Foreign
Exchange
Where any amount of foreign exchange is due or has accrued
to any person he shall take all reasonable steps to realise and to any person, he shall take all reasonable steps to realise and
repatriate it to India with in the time and in the manner
prescribed by the RBI. Several exemptions are , however , prescribed by the RBI. Several exemptions are , however ,
granted to this clause.
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Contravention & Penalties
Penalty of any kind of contravention under this Act is liable to
a penalty up to thrice the amount involved where it is a penalty up to thrice the amount involved where it is
quantifiable or up to Rs. 2 lakhs where it is not quantifiable
and where such contravention is continuing one further and where such contravention is continuing one further
penalty which may extend to 5 thousand for every day after
the first day during which the contravention continues y g
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Administration of Act
FEMA has assigned important role to RBI in the administration of this
Act
The rules , regulations and norms pertaining to several sections of the
Act are to be laid down by the RBI, in consultation with the Central
Government Government
The Act requires the Central Government to appoint as many officers
of the central government as Adjudicating Authorities for holding of the central government as Adjudicating Authorities for holding
inquires pertaining to contravention of the act
FEMA provides for the establishment, by the central government, of a p , y g ,
director and special directors appeals.
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FERA & FEMA - Comparison
In FEMA only the specified acts relating to foreign exchange are In FEMA only the specified acts relating to foreign exchange are
regulated, while in FERA, anything and everything that has to do
with foreign exchange was controlled g g
FEMA is a much smaller enactment only 49 sections as against 81
sections of FERA
In the process of simplification, many of the laid downs of the
erstwhile FERA have been withdrawn.
Many provisions of FERA like the ones relating to blocked
accounts, Indians taking up employment of foreign technicians in
I di t t i i f th A t h i FEMA India, contracts in evasion of the Act have no appearance in FEMA
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Thank You
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